Newbuild and stacking decision-making
Document Type
Article
Publication Date
1-1-2013
Abstract
Drilling contractors newbuild or idle rigs based on market conditions and business strategies. In theory, contractors invest in newbuilding when the expected net present value of adding a rig to their fleet is positive (or the rate of return on the investment meets a minimum threshold), and idle capacity when the costs of operation exceed the costs of idling. The models employed by industry are confidential but the economics of decision-making are universal, which makes quantification of the problem meaningful. We develop and parameterize models of capacity decision-making and find that high combinations of dayrates and utilization are required to justify newbuild investment and that idling capacity may be preferred even if daily operating costs exceed daily revenue. The models presented are intended to reflect industry perspectives.
Publication Source (Journal or Book title)
Lecture Notes in Energy
First Page
109
Last Page
125
Recommended Citation
Kaiser, M., & Snyder, B. (2013). Newbuild and stacking decision-making. Lecture Notes in Energy, 8, 109-125. https://doi.org/10.1007/978-1-4471-5152-4_6